Accounting and Finance
Accounting and Finance
Accounting and Finance on CDFM Module 3 tests federal financial accounting, the dual budgetary and proprietary records, financial statements, and audit readiness. Expect questions on accrual accounting, USSGL entries, Fund Balance with Treasury, depreciation, and the relationship between budget execution and financial reporting.
Core rules
- Dual-track accounting. Budgetary accounting tracks apportionment, allotment, commitment, obligation, expenditure, and outlay. Proprietary accounting tracks assets, liabilities, net position, costs, and exchange revenue on an accrual basis.
- Standards and sources. Federal accounting follows SFFAS issued by FASAB, the USSGL, the Treasury Financial Manual, and DoD financial management regulations. DoD audit readiness is tied to the FIAR strategy and internal controls.
- Financial statements. The key statements are the Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, and Statement of Budgetary Resources. Custodial activity is reported separately when applicable.
- Accrual recognition. Recognize expenses when goods or services are received, not when cash is paid. Record accounts payable and accrued expenses at period end; match costs to the period benefited.
- Depreciation. Capitalize qualifying property, plant, and equipment and depreciate it over useful life. Straight-line depreciation is common; land is not depreciated. Depreciation affects proprietary net cost and book value but does not create a new budgetary obligation.
- FBWT. Fund Balance with Treasury represents budget authority held in Treasury accounts, not commercial cash. Reconcile it to Treasury and record disbursements and collections accurately.
Worked example
A unit buys $120,000 of equipment with Procurement funds. At acceptance, the proprietary records show equipment and a liability or reduction in FBWT; the budgetary records show the obligation and expenditure. At year-end, straight-line depreciation over five years with no salvage is $24,000 per year, or $2,000 per month. The monthly entry is debit depreciation expense $2,000 and credit accumulated depreciation $2,000. This reduces the equipment's book value and increases net cost; it does not obligate new funds because the acquisition was already obligated.
Traps that cost marks
Recording an obligation as an expense; depreciating land; treating FBWT as commercial cash; omitting accrued liabilities at period end; confusing expenditure with expense; capitalizing items below the capitalization threshold; and failing to reconcile FBWT to Treasury.